Venture Capitalists Embrace ‘Kingmaking’ to Propel Early-Stage AI Startups
In October 2025, DualEntry, an emerging AI-driven enterprise resource planning (ERP) startup, secured a substantial $90 million Series A funding round led by Lightspeed and Khosla Ventures, catapulting its valuation to $415 million. This significant investment underscores a burgeoning trend among venture capitalists (VCs): the strategic deployment of substantial capital into nascent AI companies to establish market leaders early on.
The ‘Kingmaking’ Strategy
Traditionally, VCs have evaluated a spectrum of competitors before placing substantial bets on potential market leaders. However, the current investment landscape reveals a shift towards earlier and more aggressive funding, a tactic referred to as kingmaking. This approach involves infusing significant capital into a chosen startup within a competitive sector, aiming to provide it with a financial advantage so pronounced that it effectively positions the company as the market frontrunner.
Jeremy Kaufmann, a partner at Scale Venture Partners, observes, Venture capitalists have always evaluated a set of competitors and then made a bet on who they think the winner is going to be in a category. What’s different is that it’s happening much earlier.
Early-Stage Capital Deployment
The practice of deploying large sums of capital at early stages is not entirely new. In the previous investment cycle, similar strategies were employed, albeit at later stages. David Peterson, partner at Angular Ventures, notes, The 2010s version of this was just called ‘capital as a weapon.’ He cites the substantial funding into companies like Uber and Lyft as examples, where significant capital infusion occurred during their Series C or D rounds.
Competitive Landscape in AI ERP
The AI ERP sector exemplifies this trend, with startups like Rillet and Campfire AI rapidly securing successive funding rounds. In August 2025, Rillet raised a $70 million Series B led by a16z and Iconiq, merely two months after a $25 million Series A led by Sequoia. Similarly, Campfire AI announced a $65 million Series B in October, following a $35 million Series A led by Accel just months prior.
This pattern is not isolated to AI ERP. Jaya Gupta, a partner at Foundation Capital, highlights, There’s no new data between rounds. Series Bs happen 27-60 days after Series As regularly. She identifies similar trends in sectors like IT service management and SOC compliance.
Revenue Metrics and Valuations
While some startups demonstrate rapid revenue growth between funding rounds, this is not universally the case. Several VCs indicate that AI ERP startups and others raising multiple rounds in 2025 have annual recurring revenues (ARRs) in the single-digit millions. Despite modest revenue figures, these companies achieve high valuations, reflecting investor confidence in their potential.
Strategic Implications of Kingmaking
The kingmaking strategy offers several advantages:
1. Market Perception: Well-funded startups are perceived as more stable and capable, making them attractive to large enterprise clients. This perception can facilitate significant software purchases and partnerships.
2. Competitive Edge: A substantial financial cushion allows startups to invest in product development, marketing, and talent acquisition, potentially outpacing competitors.
3. Investor Confidence: Early and aggressive funding signals strong investor belief in a startup’s potential, attracting further interest and resources.
However, this approach is not without risks. Historical precedents, such as the failures of logistics company Convoy and scooter company Bird, demonstrate that substantial capitalization does not guarantee success. Nonetheless, major VC firms continue to favor early investments in promising categories, adhering to the belief in the power law of returns.
Conclusion
The adoption of the kingmaking strategy by venture capitalists marks a significant evolution in investment practices, particularly within the AI sector. By identifying and heavily investing in potential market leaders at early stages, VCs aim to shape the competitive landscape, fostering innovation and accelerating the growth of transformative technologies.
